Simplicity is the key

In the world being dominated by algorithms and complex quant models and super secret macro models, simple things can beat the market by wide margin. The FT has a review of The Dhandho Investor – The Low-Risk Value Method to High Returns by Mohnish Pabrai , that is the message of the book.

Third, invest in simple businesses. “If it takes more than a short paragraph,” he says, “there’s a fundamental problem. If it requires me to fire up Excel, it is a big red flag that strongly suggests that I ought to pass.” He likes funeral homes: it is easy to show that demand for their services is consistent. The first Patels had no choice but to forego complex analysis tools.

This guy manages 500 million and has no assistant traders or other employs like most hedge funds have. He has a bed in his office, takes naps in office and has 29% annualized return since inception. Then there are people with Bloomberg terminal, real time data feeds, multi monitors and army of people working for them and can't beat market. At the end of day speculation is very personal skill. Those who get it use very simple techniques and simple ideas.


Jack said...

I have read other articles on this fellow. I believe he lives somewhere in Europe or Britian.

Yes, he uses the KISS slogan.


internet said...

Ironically...or maybe not, the book itself was summarized fairly succinctly by the FT article.

And also, the book highlights the importance of being able to monetize your sweat equity.

Alas some people have great heart and work and work, but can't translate sweat equity to $$$$$.

Pradeep Bonde said...

He is based in USA.
Mohnish Pabrai
Managing Partner
Pabrai Investment Funds
114 Pacifica,
Suite 240
Irvine, CA 92618-3321